Industrial strategy in the UK

Industrial strategies provide an overarching plan for the economy (or key parts of it) that aims to help the government achieve economic, social and/or environmental goals. However, there are many definitions and a spectrum of approaches to the degree and types of government interventions used.  

This briefing summarises the government’s industrial strategy green paper and explains key concepts in industrial strategy theory. It also sketches the international context and includes a brief overview of industrial policy in the UK over the last few decades.

Industrial strategy green paper: Invest 2035

In October 2024, the government published Invest 2035, a green paper detailing proposals for a modern industrial strategy. The industrial strategy forms part of the government’s mission to achieve the highest rate of sustainable economic growth in the G7.

Building on the Labour Party’s thinking in opposition, the government has set out plans to use the strategic power of the state to “support and shape” the UK economy.  In addition to driving growth nationally, the government wants the industrial strategy to support: regional growth, net zero and the UK’s economic security and resilience.

The green paper includes proposals to:

• Target support on eight “growth-driving” sectors as well as places with high-growth potential, including city regions, regional clusters and strategic industrial sites.
• Create a pro-business environment, working in partnership with businesses, trade unions and experts.
• Establish an industrial strategy council to advise the government and monitor implementation of the strategy.

The green paper received a high level of engagement and has been broadly welcomed as a “positive first step” by stakeholders and commentators. The final industrial strategy is expected in June 2025 (alongside the Spending Review).

What is an industrial strategy?

Industrial strategies provide an overarching framework, or plan, for the economy (or key parts of it).

There are multiple definitions of industrial strategy. The term has  traditionally been used to describe government interventions that  support the development of particular industries, especially manufacturing and other heavy industries (hence the name ‘industrial’ strategy). However, the term is increasingly used more generally to refer to state interventions that seek to alter the structure of economic activity in a certain direction.

Industrial strategy goals might be economic, environmental or social. Policies that form part of the strategy may apply to specific sectors (called vertical or sectoral policies), across the economy (horizontal policies) or towards specific places (place-based policies). Increasingly, governments have adopted mission-orientated industrial strategies aimed at bringing together bodies, both public and private, to help solve specific societal challenges. The 2017 UK industrial strategy included four ‘grand challenges’ (on AI, clean growth, ageing society, mobility) which were examples of mission-based policy.

International context: Is industrial strategy having a revival?

There has been a renewed interest in, and use of, more active and interventionist industrial policies over the last decade. A survey by the World Economic Forum in  May 2023 found that almost three-quarters of chief economists expect industrial policy to become a “widespread global approach to economic policy over the next three years”.

Large-scale interventionist industrial policies have been introduced in China (Made in China 2025), the United States (the Inflation Reduction Act and the CHIPS and Science Act) and the European Union, both at the EU-level and within member states. A second Trump presidency, however, likely represents a significant change in approach to US industrial policy.

More interventionist industrial strategies have been used to help achieve a variety of economic and non-economic objectives. The OECD (Organisation for Economic Co-operation and Development) has pointed out that governments have used industrial policies to help them:

• recover from economic shocks, such as the global financial crisis and the covid-19 pandemic
• address, or adapt to, the impact of climate change
• increase the resilience of supply chains
• reduce their dependence on other countries
• respond to geopolitical tensions and enhance national security .

Industrial strategy in the UK: A brief history

There have been frequent shifts in the UK’s approach to industrial policy, where active state intervention in the economy has fallen in and out of favour. These shifts have reflected ideological differences not only between political parties, but also within them. Since the financial crisis in 2008, enthusiasm for industrial strategy was revived first by Lord Mandelson in the then Labour government, then by the coalition government and later by Theresa May’s government.

Shifts in the UK’s approaches to industrial policy have also been shaped by economic and social challenges. Even governments that were sceptical, or less enthusiastic, about state intervention have found themselves needing to intervene when faced with a crisis.